411: The Channel Software Tech Stack, with Jay McBain

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The channel software stack comprises a group of technologies that help companies develop, design, and execute plans to find, recruit, onboard, develop, enable, incent, co-sell with, manage, measure, and report on partners.

Influencer of the year – Jay McBain, Principal Analyst – Channels, Partnerships & Ecosystems at Forrester, joins the Conquer Local Podcast this week. Jay brings the fire by bringing the knowledge around everything around Channel Software, Channel Partners, and Channel Tech Stack. He can speak to almost everything; we dig into Google eliminating cookies, why 76% of CEOs believe their business model will be different in 5 years, and how Apple updated their phones to be completely anonymous. He shares four things that every company in every vertical is becoming a tech company: Automation, Cloud Acceleration, Remote Technology, and Partner Experience.

Jay McBain is one of the most visible and respected thought leaders in the global channel. Named 2021 Channel Influencer of the Year by Channel Partners Magazine, Top 40 Under Forty by the Business Review, and numerous channel magazines top influencer lists, he is often sought out for industry guidance and future trends. He has spent his 27-year career in various executive channel sales, marketing, and strategy roles within IBM, Lenovo, and ChannelEyes. Jay is the principal analyst for global channels, partnerships, and ecosystems at Forrester, one of the world’s most influential global research and advisory firms.

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Channel Software Tech Stack 2021
What I See Coming For The Channel: 2021


George: Welcome to this week’s episode of the Conquer Local podcast. Boy, I got a treat for you this week. We’ve managed to get probably one of the busiest individuals in the channel, Mr. Jay McBain, to join us on the show. Jay is the principal analyst of Channels Partnerships and Ecosystems at Forrester. He’s a long career in the IT channel. He was just awarded the Channel influencer of the year. And Jay always brings the heat. He recently has written an article that is taking a lot of heat or getting a lot of attention around the whole distributor model, and how that thing might not be a thing in the coming years or definitely not a thing in the way it is today. Jay also was the host of a panel that I have the privilege to be on at the Channel Partners Convention here recently. And is a wealth of knowledge.

First time I met him was a couple of years ago when we had him on a contract, and we were working with him to understand the Channel. And then we saw Jay speak at Conquer Local in San Diego. So, Jay McBain, great Canadian guy who now actually lives in West Palm Beach. That doesn’t suck. We’re gonna have him next on the Conquer Local podcast.

Mr. Jay McBain, back from Forrester. Jay, great to have you on the podcast today, and thank you for inviting me to that panel that we were on here recently. And it’s exciting to have you on the show.

Jay: Well thank you for having me. And it feels like family, we’re talking every day now. It makes me feel at home from my old Canadian days.

George: Jay was in our building here a couple of years ago, and we’ve worked together over the a number of years. And I’m excited to have you on the show today, because as you know, our organization is moving more and more into the IT channel, and we want to learn about the IT channel. There’s no better person than the influencer of the year. And congratulations on that, Jay. And the other thing, Jay is Canadian, but now you’re living in South Florida, which is every Canadian’s dream. How did that happen?

Jay: Yeah, I get asked probably a dozen times a day, like, “Hey, where are you dialing in from?” And I always have to, I can’t answer the question just with the city, because I always have to preface it with I’m a Canadian living in Southern Florida. So, wherever they up in Northern Europe or in Russia, or wherever they’re calling in from, I wanna make them feel that I grew up with 10 feet of snow, and I’m not bragging about the palm trees and the ocean like lapping up at my feet right now.

George: Okay. You’re rubbing it in. You’re rubbing it in. You worked for a company called Forrester and I’d love for you to give us that overview of what your role is because, I think I know because we’ve worked together, but I’d love to hear it again just so our audience can hear it and it will resonate for me again.

Channel Software Industry Overview

Jay: Yeah. So, Forrester is really interesting. It’s an analyst firm, and you may have heard of Gartner, you may have heard of IDC and companies like that. And I didn’t know a lot about it earlier in my career, but later in my career, analysts or people that are provocative. We’re not the media which just regurgitate press releases and put nice headings on the front cover, so that we get sponsorship. We’re actually the opposite. My tagline here, my corporate tagline is Be Bold. The one before it was Challenged Thinking, and Lead Change. So, last week when I write a piece about distribution that was very very punishing, other than some cease and desist letters and other things, that’s what I’m encouraged to do. And none of it was non-factual, and if we were challenged on a fact that we got wrong, we would definitely correct it and put out a public apology and everything else. But the point is, let’s look at this industry and let’s not sugar coat it, like maybe an industry association would or a magazine would, and let’s maybe talk about the elephant in the room and things like that. And it actually, once you make people mad it turns around into, you talk about 10 things here. Can you unpack it through my lens? And what should I do going forward?

George: It’s interesting because I’ve been watching, and I saw the document, I read it through, and we don’t need to get into it. Maybe we could just pin it in the broadcast, but I wanna tell you, and you know, my background, being in the media business for a good part of my life, and then I arrive at Vendasta, I meet Brendan King, and I’d known him for a long time, and I met him and understood what they were doing. And part of the reason why I came was I knew how to speak media, because that was some of the first customers we were dealing with. And I bet you there are some folks in the the Yellow Page business, the newspaper business, they would love to have had a Jay McBain back in the day calling the baby ugly, and giving them a wake up call. Because, there was a news story here recently, and again, depending on when you listen to this, but there was a new story recently, DexYP Thryv, just bought Sensis in Australia for $247 million. Like that was a multi-billion dollar business that was picked up for $247 million. And we all know that there was a lot of challenges there, but at back in the day when I was selling radio ads against the Yellow Page folks they would get all the budget that they never thought that they could be in this spot. And you are challenging folks to think differently and to wake them up, because the world is changing. And if you just stay in this lane that you are, you may end up selling for 247 million when you were a multi-billion dollar business. Am I overstating that?

Jay: No. And I mean, to go back to your media example when I moved from Canada, 11 years ago, in 2009, I wrote the biggest magazine in our industry is called CRN, Channel Reseller News. I wrote them a $2.1 million check that year. My boss got on the front cover, we took the back page of the advertising. We got on the top, we won every award that year. The next year I cut them a $200,000 check. And what I didn’t realize at the time, is that my counterpart at Dell, HP, Cisco, Microsoft, and everybody else cut theirs by 90% the same day. So, that business went from 250 people, and a hundred million dollar business down to, selling back to the owners and trying to keep it afloat.

George: And that was when you were with IBM, right?

Jay: Yeah. That was the Lenovo.

George: Lenovo, right.

Jay: But IBM took over.

George: It’s an interesting thing, I remember I’m in Washington with Brendan, and we’re at a convention, it was the big newspaper convention. And what they would do is they would bring all the advertisers in. And at the time, the head of advertising for the Miami Herald, they ran into him in the hallway and he had a look on his face like he’d just been punched in the mouth. And I was like, “Sam, what’s going on?” And he says, “We gotta go have a drink.” So, we went to the lounge and had a drink. And he said that, “I just found out that Macy’s and Walmart are cutting their budget by 90%, and that’s at $5 million account for us.” And the problem was that there was just this cloud over the entire event, because what the newspaper business would do at that event, would bring all the advertisers in pay for them to come, and then the VPs of sales would go in, and they get their ad buy for the year. And that industry just completely changed. So, here’s why I love the fact that we have you on the show. There’s nobody more plugged into the space in the IT channel and understanding. And I remember that boardroom we were sitting there and you were on the white board and you were talking about marketplaces, and I see over your shoulder, that graphic that you build every year, and the logos that are on there, and the folks that are moving into this space. I’d love for you to tell this audience what you believe is about to happen to that distributor model, the IT channel, because of marketplaces and because of technology.

Jay: Yeah. So, we are at a 2009 moment where the advertising industry was in the channel now. The difference though now, is the channel partners, the vendors, the distributors have a really big opportunity to take advantage of the future. There may be a 90% cut in one place, but there might be a 300% or 400% opportunity on the other side. Every company in every industry including media is becoming a tech company. So, with everyone flooding in, there’s millions of companies flooding into this space, and there’s an unbelievable opportunity. If you look at just in COVID in the last one year, the biggest spending opportunities by customers in every industry, automation, number one, number two, cloud acceleration, number three, remote topology, new future of work, and number four, customer experience, partner experience marketplace.

Those four investments are all technology investments. So, every company and every industry is being disrupted by somebody from technology and they’re quickly coming in. So, when you look at the future, 76% of CEOs in every single industry, this is Accenture, think that their current business model will be unrecognizable in five years. The number one reason driving that is ecosystems. And it’s a completely different way of thinking about channels in the way that we’ve thought about them for 39 years. Most channel professionals would equate the channel, the word channel to a transacting or a reseller based channel, where the money changes hands. And what’s opened up, and when last week IBM announced a billion dollar investment in ecosystem, it wasn’t an additional billion dollars are gonna put into the incentive plan for the resellers. It’s completely re-imagining the future of the industry. And so, underneath that, we can talk about a few layers of it. But in the end, I put out a prediction document, with 10 predictions, the answer to all 10 is basically marketplace. It’s a digital connective tissue for the next decade that will change industries as well as change companies and realign the Fortune 500. And it’s gonna be anchored on this marketplace, which is my goal.

Making Major Changes

George: Jay, we can see this happening already. Like, let’s talk about Canadian tech companies for a moment. You know, I wished that I had more Shopify stock as to what’s happened in the E-commerce space this year. And also, I remember I’d love to get your lens on this. I remember hearing a quote a number of years ago, yeah, I mean, it was coming from that CEO of General Motors at the time. This is even before the bailout and all that sort of stuff, and it was like, “Making a major change at General Motors is like moving a cruise ship with a tugboat.” And is that some of what you’re getting pushed back against when you write challenger articles, like the one you wrote last week? Is you’ve got massive organizations, there are massive kingdoms inside those organizations, and you’re the one saying, “Better wake up and make a change, or you’re gonna be an article. And remember the Clayton Christensen book about the steel mills, right? Like innovator’s dilemma.” We’ve seen this happen so many bloody times, you would think that organizations just have, big organizations have a bunch of people sitting in a room, thinking up shit, as to how they might be able to void off what’s coming.

Jay: Yeah. And I don’t know if you’ve ever seen that really cool graphic that goes through Fortune 500 over the course of 80 years. And watching companies grow and shrink and grow and shrink. And the companies that were on 10 or 20 years ago are nowhere to be found, and they’ve gone out of business or they’ve been sold. This is just happening. And it all revolves around the customer. All we talk about in the media, all we just talked about in automotive, with now General Motors committing to a 2035 full electric. Now Volvo came out today and committed to 2030. Ford has come out and committed to 2030.

The buyer changes everything. The buying behavior, the buying psychology, the buying journey dictates everything in an industry. And most of my research revolves around the buyer, for example, the technology industry. And all of the things that flood out of them buyer, so, 73% of them by the way think marketplaces are kinda convenient. And then last year where marketplaces grew more in the first three months of COVID than the last 10 years combined, we did a massive, like multi-hundred person research project last year on the future of B2B buyer. The net conclusion to save you a thousand pages of reading is that the future B2B buyer is gonna look like a consumer. The way you buy a car from General Motors, is the way you’re gonna buy software. Is the way you’re going to buy pharmaceuticals.

Is the way you’re going to buy banking products in the future. You are gonna take a very consumer digital, or digital only approach to your entire journey. And if you start there, and 73% of them today, you don’t think obviously Amazon is pretty convenient. And obviously when you’re buying seven layers of software would be very convenient to get that all in the same place, or other products. To get that all kind of in the same place, then you rep through kind of the subscription and consumption models that every company in every industry even as a consumer are coming back trying to get you to pay monthly now for stuff you used to just buy once. And so, this whole Netflix model of 12 bucks a month, or 20 in Canada, is interesting because you’re okay, because you get a lot of value. You would have dropped 12 bucks on a bucket of popcorn in the olden days, and you get a lot more value than a bucket of popcorn. But if you go three months and don’t watch Netflix, that’s gonna start to glare at you on your credit card statement, and you’re probably gonna cancel it. In a day of going subscription, now we’ve seen IBM, Jettison Net Services Group a couple of months ago, they’re just Jettison Watson Healthcare. And now they’re our pure subscription company. Michael Dell, $93 billion organization, EMC, VMware, there’s seven different companies, has just taken all 93 billion to subscription model. Accelerated because of COVID. Chuck Robbins at Cisco took that entire organization 100%. HPE has been on this journey. They said they’re gonna be there in 2022, which is nine months from now. You’re talking about 80% of the client server era, and hundreds of billions of dollars that are shifting from maybe Larry in the white van into marketplace. You don’t subscribe or you don’t consume anything. You don’t pay the cable guy in his white van your Netflix subscription. It’s digital, it’s automated.

So, this future where for many resellers that are in for distributors, that make up 80% of their revenue, just those companies that have all shifted now where the transaction is the first 30 days with the customer. And they need to shift their entire business model, where now adoption, every 30 days, correlates to whether they’re gonna renew. Stickiness and integrations, whether they’re gonna renew, and then upsell cross sell for every 30 days forever. So, this idea that there’s a whole new channel that comes after that 30 days, that you need to go recruit, because it’s probably not in your current space. And then the other side of it, which I think is the more important side, these new digital buyers going through these digital journeys, literally this morning, Google announced that there is no more retargeting. There are no more cookies. There is no more privacy or tracking on the internet going forward. Even though the MarTech, the 8,000 companies in MarTech tried to create something new, harsh your email address, they said no. Their entire business model is predicated on this re-tracking. So, talking about an internal change but then last week, Apple updated all of our phones allowing you to be truly anonymous, whether you’re a consumer or a buyer on the internet. So in literally overnight in one week, the entire MarTech stack, at least half of it got neutered because they lose their data early. The only way you’re gonna get visibility to your buyer early in their journey is through an ecosystem. And that’s why 76% of CEOs basically put the future success of their company and survival of their on ecosystems.

George: Well, it’s interesting you brought up those two stories, because it’s two that we’ve been watching closely, because you know where our company started was in the MarTech space and working with those publishers and selling ads. I’ve been talking for a couple of years, don’t hang your, maybe more in a couple of years, probably four or five years, don’t hang your hat on the episodic ad sale, which is how I started in sales back in the day was selling ads. But I would have to resell every month. It wasn’t a subscription based business or anything like that. What I wanna make sure that the audience understands when you talk about marketplaces, as you’re talking about an E-commerce transaction. It’s just in the channel. It’s this idea of you have to have a marketplace online where people can conduct business in a digital format. And what we talk about in our vernacular is E-commerce grew more in 90 days in COVID than it grew in 10 years. But that’s exactly what you’re talking about when you talk about marketplaces. I remember in that board room a couple of years back when you were doing your whiteboard session, and you were quoting data and everything else, and you said, “You will have marketplaces for all the plumbers, and then you’ll have a marketplace for all the hospitals, and you’ll have a marketplace.” And what you were referring to is there’s a set of products or services for that customer base, and you’re gonna have a store for them. That’s online. It’s an online transaction. And what I’m hearing from you is the large tech companies, Cisco, Dell, HP, are already in that direction. And they want you to just go to their website, their marketplace, and do the transaction. And there won’t be somebody in the middle there. It’ll just happen with them. Am I reading that correctly?

Jay: Yeah. There’s an important delineation to what you just said. Most of the growth in that first nine days that ecosystem growth where in the US one third of the economy was now flowing E-commerce in the first quarter of COVID. 83% of that growth was marketplace. But there’s actually an important distinction financially in terms of what is E-commerce and marketplace. E-commerce to the company that hosts it, think about Dell in the 1990s, they record that in their P&L statement as a direct sale. And if they sell a logic tech mouse, or if they sell an extended warranty that somebody else does, that’s a little bit of a product extension, and it gets recorded differently from a financial perspective. If you think of a marketplace, you think about what I call a multiplier number. If somebody buys a dollar of Salesforce, there’s $4.65 that gets it to work. So, Salesforce today sells an additional dollar on their app exchange marketplace of other people’s products, of which they tax at 15%. So now, Salesforce records the dollar as a direct sale. Now they record an additional dollar of pass-through which they look more like a distributor, and they take a 15% profit margin on the pass-through. Now, the question is here, Salesforce is now worth more on the stock market than Oracle at half the revenue. They just got added to the Dell 30 and kicked off Exxon, related back to our General Motor is going full electric. And here’s a company that’s at 20, 25 billion, that is going to be a trillion dollar company. There’s gonna be the sixth company that hits a trillion valuation.

The reason why is exactly the marketplace. So, if you go back and say, “If they can tax the $4.65 at 15% and do the math that actually doubles the revenue overnight.” They’re maybe not 250,000 partners, and putting them on the marketplace so that they can tax hard work, soft work and services downstream. So, the customer actually pays $5.65 to Salesforce and Salesforce doles out the money, and taxes the entire thing. And so, when they double their company in four years and then tax the ecosystem at that same time, they’re a hundred billion dollar company. And then the stock market is gonna add that, a 10 time multiplier, and make them a trillion dollar company. Marketplace is the wall street equivalent of how you take this $20 billion company to be worth a trillion. It is really, really important. And when IBM spent a billion last week, when other companies are completely transforming themselves, they’re all with the lens of how do we get into the trillion dollar club? And it all comes back to ecosystem subscription embedded, white labeled multipliers, and then marketplace as the connective tissue that monetizes and taxes all of it. That’s it. That’s the entire story of marketplaces that’ll be written 10 years from now. And the companies that are on the Fortune 500, 10 years from now, that have all changed, will be the ones that have won the platform layer, that will have won this equation of where they can own and tax as a federal government would their ecosystem.

George: One of the things I think is interesting is you work with a number of large distributors and we don’t have to look too far. We can see the acquisition by Apollo of Tech Data, and along with that acquisition was a close to a billion dollar spend to build out, let’s use the term marketplace, because at the end of the day that’s what needs to be there. And then we also see the move at Ingram, where they bought Odin quite some time ago, but we were on that panel with Lincoln Lincoln, who is leading CloudBlue sales. And they’re all in on that. Do you see more distributors moving in that direction?

Jay: Yeah, it’s an interesting story. Like Tech Data was 750 million was aligned. The person that runs Tech Data, Rich Hume used to be my boss at IBM. And as the story goes, like in 2004, I was just a kid living in Markham, Ontario Canada, and here I have a new boss like 17 levels above me, named Rich Hume. So, I go on LinkedIn and what’s this, he’s an accountant. Like what the heck is an accountant running a PC company? And then 12 months later we were sold to Lenovo. So, they had already been decided years ago by San Camazano, Rich Hume was the guide to transform and make it happen. He was put in charge of Tech Data and given $750 million as an accountant to go figure out this digital connective tissue, and to go build out the ability to do that. Ingram in similar story and things like that. So, if you read between the lines, they get it. I mean, what I wrote about distributors last week, it’s not that this is new news to them. It just really hasn’t been public before. All these stories about Salesforce and distributors, you don’t read them in the press, because that’s not the press releases they’re releasing right now. Because they have to get there.

George: Well, Jay, it’s always a pleasure speaking and we’ve had a lot of FaceTime here over the last few days of the panel and everything. And I have always found that, you’re ahead of the game, which is your job and you’re reading the tea leaves, and you’re giving a lot of good advice there. And I would love for you, you know our audience of the Conquer Local podcast now into our fourth season. What advice would you have for those that are working with their clients and trying to give them advice on what they need to be thinking about as far as their business models?

Jay: Yeah, the first thing if I could use the Canadian quote, “Skate to where the puck is going to be.” Is understand that a lot of these trends that are underway now, and these big announcements that you’re seeing almost on a daily basis, understand that 76% of your CEOs think that your current business model won’t be the one they have five years from now, is understanding through your own lens, understanding through your own customers outwards, what it means.

Who’s going to surround them at all stages of the journey? How you can add value as a sales person for example? There’s now a 51% chance your customer’s gonna get to vendor selection without wanting to talk to you. So, understanding what that means, understanding what it means digitally, and then all of the different partnership elements to that 75% of world trade that goes indirectly, always be thinking of yourself in terms of who your ecosystem is, and how you can get to your customer directly, or influence the influencers that get there indirectly.

George: Mr. Jay McBain, joining us, Forrester and Channel influencer of the year. It’s a real privilege to have you on the show, and always great speaking to you. I appreciate your time. Thanks for joining us.

Jay: All right. Thank you so much.


George: Well, Jay delivers the data and the insights, and he definitely is a challenger, you can hear that. But that’s his role, he’s there to be provocative. He’s analyzing, he’s looking for great Wayne Gretzky quote, right? “Skate to where the puck’s going to be, not where it is.” And that’s what Jay’s talking about is where is this space going to be?

So, back about seven minutes and 50 seconds into the podcast he dropped four nuggets for you. Every company and every vertical is becoming a tech company. Remember the CEO of Domino’s Pizza said a number of years ago they’re a tech company, and that’s when they introduced the pizza tracking app. It shows you where the pizza are. Well, here’s Jay’s four things that every company and every vertical are going to do to become a tech company. Number one, automation’s. Number two, they’re going to accelerate to the cloud. Number three, remote technology. And then number four, the experience of their customers. That digital customer experience that we’ve been talking about on the show for a number of years. And remember, 76% of CEOs believe their business model will be different in five years.

Okay, George, but Jay was talking about Fortune 500 and Fortune 50 companies. And he talked about Oracle and Salesforce. I am selling to hardware stores, and I’m selling to roofers, and I’m selling to doctors. What does this have to do with me? I’m telling you right now there’s a CEO of those companies too. And the CEO is the person that plunges the toilets and shovels the snow, and sweeps the leaves off the front step. Those businesses need to understand that their business model will be different in five years. We actually just noticed this happen in the last 12 months, where businesses are like curbside pickup a year ago in January of 2020. It wasn’t a bunch of people advertising for that, and then the world changed. We had a forcing function by the way, but those changes were happening anyways.

It’s interesting to hear Jay talk about these large companies, and how they are making major moves. And yes, they have the budget and the money and the analysts and people in rooms, just thinking up stuff. But we need to encourage our customer base more than ever that they may need to move to a digital experience, that they need to move to automation. That they need to move to cloud acceleration, remote technology, and a digital customer experience.

Remember back a number of episodes ago when our friend Neal Polachek was on the show and he talked about, Think Like An App. Neil was talking about what Jay is talking about today. Every business in every vertical is becoming a tech company. And it’s that experience that we love where we know where the Uber is at. And we’re not wondering if the cab is gonna come and pick us up, because we can see it right on the thing. We can actually hold it up with the orange little flag and it’ll come over and pick us up. We know how long it’s gonna be. That experience, just think about that. And then how do we give that to the roofer? How do we give that to the plumber? And how do we give that to the person doing extermination? Every business in every vertical needs to be thinking this way. And I’m always inspired listening to Jay, because he calls it the way that he sees it. He takes no prisoners. He just lays it on the line, but that’s his job. And we need folks like that to help us think different, and to think about the unintended consequences of what’s happening right now so that we can be ready for it.

I hope that you found it as insightful as I did. We’re gonna have some great links and things inside the notes so you can learn even more. And Jay is a great guy to follow on LinkedIn. I follow him on a regular basis, he’s always bringing new insights and new information. Thanks for joining us this week on the Conquer Local podcast. My name is George Leith. I’ll see you when I see you.

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